Regulating the Financial Sector: Domestic Regulatory Regime Strategies to support financial stability and development by Marion Williams Rio de Janeiro,

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Presentation on theme: "Regulating the Financial Sector: Domestic Regulatory Regime Strategies to support financial stability and development by Marion Williams Rio de Janeiro,"— Presentation transcript:

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Regulating the Financial Sector: Domestic Regulatory Regime Strategies to support financial stability and development by Marion Williams Rio de Janeiro, August

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Financial stability and development Finding the balance between financial stability and development Sensitivity to the stage of development Sensitivity to national peculiarities Keeping regulation in step with the financial landscape Maintaining national policy space

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Choice of corporate form of establishment Choice of subsidiary versus branch operation and implications for regulator Advantages and disadvantages of predominance of foreign owned banks National autonomy and international regulation Importance of commitment of banks to national financial and development goals

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Coverage of the financial sector Design of the regulatory framework. -direction of and communication with regulated entities -clarity of regulations -scope of regulatory coverage - beyond banks -adherence to international norms- where these do not conflict with national objectives -competence of supervisory function -a supporting legal framework -attitudes to compliance and enforcement

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Key areas of regulation Capital adequacy – without over-reliance on same Use of market mechanisms without reliance on the self correcting claims of the market Judicious use of self regulation Role of guidelines issued by professional bodies Moral Suasion Standards and codes

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Post- crisis emphasis on financial stability Responsibility for financial stability and control over factors influencing it Cross –border collaboration and exchange of information Powers of intervention Capacity for crisis management Good governance, audit functions and the role of the Board

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Securitization Securitization – guidelines on quality and quantity – role for the regulator ? Transparency: linking the value of underlying credit to the value of the securitized credit Self -securitization of originated credits: should it be controlled? Investment and retail banking: should they be separated? A developing country perspective.

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Procyclicality Countering pro-cyclicality in regulation Basel ll and procyclicality Countercyclical polices and the ability of regulators to implement them without cooperation from other authorities Stress- testing as a means of identifying and mitigating procyclicality

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Difference in regulatory systems in developing countries Importance of flexibility in rule-making for developing countries Regulation and sensitivity to credit access for SMEs Are higher levels of capital required in developing countries or should that be optional ? (cases of Singapore and Thailand) Should capital requirement vary with the liquidity or illiquidity of markets? Collaboration among regulators within and across borders at the regional level as a supplement to lender of last resort funding

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Difference in Regulatory systems in developing countries (cont’d) Ensuring that regulatory structures support stability, growth and welfare of developing countries Minimizing the adverse externalities of liberalisation, possible increased volatility and exchange rate appreciation Ensuring that national policy space is not restricted